Wall Street’s constant creation of schemes to exploit leveraging (using very little investment to gain huge profit) and ensuring that laws and lawmakers protect those interests through a finely honed, humongous finance lobby housed all along K Street in Washington, D. C., actually control, and therefore define, America.
The rule is: Money talks and (you know what) walks.
But the political system is called democracy – even as Americans of African descent can attest to a far different reality than that of America’s dwindling white majority — and capitalism is “our” economic system. Historically, by law, African
Americans began the sojourn here as chattel slaves. When they were emancipated, they were prohibited from participating in both capitalism and democracy, and still are, though it is arguable as to what degree.
Wall Street, through its K Street finance lobbyists, spent $475 million in political contributions during the 2008 election campaigns to ensure that they remained unregulated. Of Capitol Hill’s ten top recipients, only the fifth in descending order of amounts received was a Republican: Minority Whip Rep. Eric Cantor of Virginia.
The top four Democrats above Cantor were Sen. Charles Schumer of New York; Majority Leader Sen. Harry Reid of Nevada; Sen. Kirsten Gillibrand of New York and Sen. Chris Dodd of Connecticut.
Before the 2008 financial meltdown, the finance lobbyists had convinced former President George W. Bush, Congress and the Federal Reserve not to reign in reckless lending – which enabled the catastrophic housing bubble. U. S. debt went through the roof due to easy money, and out-of-control leveraging negatively affected global banking. It fell to newly elected President Barack Obama to pull off the biggest bailout in American history, and he did.
What should anger every American is that Wall Street entities worth over $100 billion each could – hocus-pocus — pop-up in the red. The con is called “deceptive accounting practices.” And the fact that the Ponzi schemes which mortgage providers and investment bankers concocted were not known to be toxic is simply unbelievable. Furthermore, any banker who admits to participating in the risky sub-prime market and didn’t know the game is guilty of misrepresentation.
You mean no law enforcement agency is going to book these guys?
What produces more gall is that these money men were allowed to sucker working class poor and near-poor people, and that a large swath of America’s middle class went down the sub-prime mortgage drain.
There were no regulations. No morality existed on Wall Street, K Street, or on Capitol Hill. Where are the philosophical debates about ethics and morality in business? What about discussions concerning acts against the American people that stem from the financial sector within America? Are they not acts that are un-American? Or are we finding out that Wall Street and K Street have wrapped their coils around Main Street, too?
British political economist and author Robert Skidelsky’s new book, Keynes: The Return of the Master, brings economist John Maynard Keynes back into importance “to provide a ‘general theory,’” Skidelsky says, “which explains how economies fall into slumps, and to indicate the policies and institutions needed to avoid them.”
Skidelsky says that 70 years ago, Keynes pointed out the fallacy of the “so-called ‘efficient market theory’” believed by most economists, that he points out “should have been blown sky-high by last autumn’s financial breakdown.”
Skidelsky further tells us that “When shocks to the system occur, agents do not know what will happen next. In the face of this uncertainty, they do not readjust their spending; instead, they refrain from spending until the mists clear, sending the economy into a tailspin.”
Securitization is a financial innovation that spread sub-prime mortgages throughout banking, worldwide. Skidelsky writes that, “Securitization is the process of bundling up individual mortgages and then slicing and dicing them into different securities – tailored to the requirements of different investors – which can be sold on by the originating bank.”
Sub-prime borrower risks could therefore be spread widely and insured by credit-default swaps.
“These poisoned sausages were snapped up by investors the world over,” Skidelsky continues, “hungry for ‘yield lift’ to offset historically low interest rates on government bonds. Their marketability hugely increased the possibilities of leverage – or borrowing – by their holders, and thus led directly to the build-up of debt.”
And now the lambs that Wall Street and K Street fleeced – namely the American people – are bailing the financial sector out while its executives pay out large bonuses to themselves for losing trillions of dollars.
And nobody is stopping them!